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  Petrochemicals: FPG 1Q18 core earnings +2.8% YoY to NT$56.62bn
  IC Design: ASIC firms showing some resiliency in low season
  NB/PC: Sales reflect low seasonality
  Handset Components: Amid low sales seasonality, market focuses on FII IPO
  Passive Components
  Container Shipping: Post CNY rate consolidation; look for robust peak season
  Semiconductor: Inventories back to normal, sales trough pulled forward by crypto-currency demand
  Netcom Equipment: Sustained 100G switch demand from North America, etc.
  Machinery Components: Rosy market outlook for 2018
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Title:Petrochemicals: Buy FPC, FCFC, NPC
Download File:Petrochemical industry note 180112--sinopac.pdf 
Summary:Petrochemicals: FPG core earnings set new high in 2017

Within the group, FCFC and FPC both set new earnings highs in 2017: FPG core members posted an aggregate op. profit of NT$49.97bn for 4Q17 and NT$182.37bn for 2017 (+25% YoY). Combined net profit of the core members reached an all-time high of NT$237.25bn (+14.2% YoY). In addition to healthy market demand, we see two key factors that will underpin lofty petrochemical prices in 2018. First, we estimate WTI crude oil prices will average US$55/barrel in 2018, or about US$4-5 higher than in 2017. Second, we believe China’s crackdown on heavily polluting industries will cap new supply from China. We see a positive 2018 earnings outlook for FPG.

We reiterate our Buy calls on the following:

  • FPC (1301 TT), TP at NT$106 (1.9x 2018 P/B), 4% upside.
  • FCFC (1326 TT, TP at NT$119 (1.9x 2018 P/B), 10% upside.
  • NPC (1303 TT), TP at NT$87 (1.9 X 2018 P/B), 7% upside.
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